No one has been arrested and the joint investigation between Victorian and NSW police is ongoing.

Demons spokesman Ryan Larkin said the club would be thankful to have the flag returned to its rightful owners.

“It's obviously an important part of the club's heritage and we appreciate the efforts from the AFL, Victoria police and the NSW police in recovering the item,” Mr Larkin said.

“Unfortunately we still have a number of our past flags that are unaccounted for but this is a valued addition to the collection.”

The Demons discovered several years ago that some of its flags were missing.

It was suggested to Fairfax Media that the flag in question might have been housed, at least initially, by the Melbourne Cricket Club, because the Melbourne Football Club was actually a division of the MCC until it separated in 1980. The MCC is also aware that the flag has been for sale online.

If the 1948 flag advertised is authentic, it would join a number of other premiership flags that have gone missing, or been stolen, from Victorian clubs over the years.

Back in the 1990s, Carlton discovered that its 1970 and 1972 premiership cups had been stolen - it had been given replicas - and the person with possession of them had them returned via Eddie McGuire, who was then host of The Footy Show.

Melbourne does not have a 1948 premiership cup, because the cups were not introduced until 1959 - meaning the Demons have only three cups, from 1959, 1960 and 1964, their last premiership. All are housed at the MCC.

"If the flag is real, it should be at the MCC. It shouldn’t be anywhere else," said former Melbourne historian Lynda Carroll.

The Demons had checked with the MCC several years ago and discovered some flags were missing.

The 1948 premiership is one of the most legendary of Melbourne's 12 flags since it had to win a grand final replay against Essendon, following the first drawn grand final in VFL/AFL history.

Champion forward Jack Mueller booted six goals in both the grand final and grand final replay - after eight in the preliminary final against Collingwood - while the Bombers rued that they booted an incredible 7.27 to 10.9 in the drawn game, in which future coaching legend Norm Smith also played.